Analyst sees tough times for USF&G Company lost $56 million in second quarter.

August 01, 1991|By Ross Hetrick | Ross Hetrick,Evening Sun Staff

USF&G Corp. will be lucky to break even during the next six months, according to an analyst who follows the giant Baltimore insurance company.

"I guess the outlook is pretty miserable," said D. Gordon Luce Jr., an insurance analyst for Brown Brothers Harriman & Co., a New York investment banking firm. "The price [of insurance] is not going to turn fast enough to help them out," he said.

The forecast comes after USF&G yesterday reported that it lost $56 million, or 77 cents a share, during the second quarter. The loss was primarily due to 17 different catastrophes that hit areas of the country where USF&G has large number of policies.

The loss compares to a net income of $5 million, or 1 cent a share, for the same quarter a year ago. Revenues in the second quarter were $1.06 billion compared with $1.13 billion in the 1990 second quarter.

The disasters, which included storms and tornadoes in the Midwest and South, drained $46 million from the company, the largest amount for one quarter in USF&G's history. The previous record was $36.3 million in the 1989 third quarter when the company paid claims on the disaster caused by Hurricane Hugo.

The company also took an additional $11 million in restructuring charges, primarily connected to severance costs for staff reductions and streamlining businesses.

Earlier this year the Baltimore insurance company dramatically revamped its operation and eliminated 2,825 jobs, about a quarter of its work force. The company lost $569 million last year.

For the first six months of the year, losses totaled $111 million, or $1.47 a share, compared with net income of $56 million, or 57 cents a share.